Salem Telephone Company Case Analysis
1.) VARIABLE EXPENSES
- Power
- Operations (hourly personnel) FIXED EXPENSES
- Rent
- Custodial services
- Computer leases
- Maintenance
- Depreciation
- Operations (salaried staff)
- Systems development and maintenance
- Administration
- Sales
- Sales promotion
- Corporate services
2.)
VARIABLE EXPENSES: COST/HOUR JAN. FEB. MAR.
Power: 4.7 4.7 4.7
Operations (hourly personnel): 24 24 24
TOTAL: 28.7 28.7 28.7
3.)
CONTRIBUTION MARGIN INCOME STATEMENT SALES/REVENUE
Intracompany: 205 hrs * $400/hr = $82,000 Commercial: 138 hrs * $800/hr = $110,400 Total: 343 hrs $192,400 VARIABLE EXPENSES Power: $4.7/hr * 343 hrs = $1,612.10 Operations (hourly personnel): $24/hr * 343 hrs = $8,232.00 Total: $9,844.10 FIXED EXPENSES
- Rent $8,000
- Custodial services $1,240
- Computer leases $95,000
- Maintenance $5,400
- Depreciation $26,180
- Operations (salaried staff) $21,600
- Systems development and maintenance $12,000
- Administration $9,000
- Sales $11,200
- Sales promotion $8,083
- Corporate services $15,236
TOTAL: $212,939
Sales $192,400 Variable Expenses ($9,844.10) Contribution Margin $182,555.90 Fixed Expenses ($212,939) Net Profit/Loss ($30,383.10)
4.)
BREAK-EVEN Intracompany (revenue): 205 hrs * $400/hr = $82,000
- Variable Expenses: 205 hrs * 28.7/hr = $5,883.50
- Contribution Margin: $76,116.50
Total Fixed Cost: $212,939
Contribution Margin: ($76,116.50)
“Remaining”: $136,822.50 136,822.50 / (800 – 28.7) = 177 units (Break-Even)
5.) A) Commercial = $1,000/hr , 30% demand decrease Intracompany: 223 hrs * $400/hr = $89,200 Commercial: 97 hrs * $1,000/hr = $97,000 Total: 320 hrs $186,200 Variable Exp: 320 hrs * 28.7/hr = $9,184
Sales $186,200 Variable Expenses ($9,184) Contribution Margin $177,016 Fixed Expenses
- Power
- Operations (hourly personnel) FIXED EXPENSES
- Rent
- Custodial services
- Computer leases
- Maintenance
- Depreciation
- Operations (salaried staff)
- Systems development and maintenance
- Administration
- Sales
- Sales promotion
- Corporate services
2.)
VARIABLE EXPENSES: COST/HOUR JAN. FEB. MAR.
Power: 4.7 4.7 4.7
Operations (hourly personnel): 24 24 24
TOTAL: 28.7 28.7 28.7
3.)
CONTRIBUTION MARGIN INCOME STATEMENT SALES/REVENUE
Intracompany: 205 hrs * $400/hr = $82,000 Commercial: 138 hrs * $800/hr = $110,400 Total: 343 hrs $192,400 VARIABLE EXPENSES Power: $4.7/hr * 343 hrs = $1,612.10 Operations (hourly personnel): $24/hr * 343 hrs = $8,232.00 Total: $9,844.10 FIXED EXPENSES
- Rent $8,000
- Custodial services $1,240
- Computer leases $95,000
- Maintenance $5,400
- Depreciation $26,180
- Operations (salaried staff) $21,600
- Systems development and maintenance $12,000
- Administration $9,000
- Sales $11,200
- Sales promotion $8,083
- Corporate services $15,236
TOTAL: $212,939
Sales $192,400 Variable Expenses ($9,844.10) Contribution Margin $182,555.90 Fixed Expenses ($212,939) Net Profit/Loss ($30,383.10)
4.)
BREAK-EVEN Intracompany (revenue): 205 hrs * $400/hr = $82,000
- Variable Expenses: 205 hrs * 28.7/hr = $5,883.50
- Contribution Margin: $76,116.50
Total Fixed Cost: $212,939
Contribution Margin: ($76,116.50)
“Remaining”: $136,822.50 136,822.50 / (800 – 28.7) = 177 units (Break-Even)
5.) A) Commercial = $1,000/hr , 30% demand decrease Intracompany: 223 hrs * $400/hr = $89,200 Commercial: 97 hrs * $1,000/hr = $97,000 Total: 320 hrs $186,200 Variable Exp: 320 hrs * 28.7/hr = $9,184
Sales $186,200 Variable Expenses ($9,184) Contribution Margin $177,016 Fixed Expenses